Michigan homes no longer savings bastion

mlive.com ^ | 3/11/07 | Sarah Kellogg

[DB]

In 10 years your home value only increased 15%?

The cost of building your home has increased at least 30% (probably closer to 50%) in that time.

What did Michigan do to pummel themselves so badly?

We have prop 13 in California. It caps the the year to year increase of value assessment to 2%. It also caps the tax rate to essentially 1%. Property only gets reassessed to current market value when it is bought and sold (or you build something new on it, which only the new part gets reassessed at current market value). That makes your yearly property tax predictable and not so out of control.

[carolinalivin]

15-20 years of extra money you don't need to give to the bank when your family probably needs it most. If you have some extra every month, buy a second home and have two houses appreciating or three or four. Better leverage than the stock market and almost everywhere else.Don't give up your tax deduction. If you have a good retirement, you'll need the deduction. Don't base your retirement on making less money. Cost of living will put you in the poor house if you live.

What good is having money sitting in your house? If there's a disaster, you may loose most of it. If you need money after you retire, it's harder to get. If you have hard times the bank will sell your home in a minute and short sale at that. No need to negotiate with people who don't owe you any money.

[carolinalivin]

And.....if the net cost of borrowing on your home is 4% after the tax deduction, why not put the money into something at 7.3% or more and make money.

The worst thing you can do is let hundreds of thousands of dollars sit in your paid off house.

[gas0linealley]

"Put all your eggs in one basket -- and watch that basket!" - Bernard Baruch.

Few of us are Baruch so most of us will trip and break all of our eggs.

Hear, hear.

[TCats]

I know all about Jarvis-Gann, I lived in Marin County for about six years, made out quite nicely on my home and am likely in the process of giving some of it back here.

Prices here were rising at a 'Normal' rate up until about three years ago. Since then they've actually dropped and the end doesn't appear to be in sight on this score. That's why the overall market value is so low relative to the cost ten years ago.

I no year has the assessment dropped, always rising with the lowest annual rate at 3.5%

[Lancey Howard]

Hmmmm..... I know what Michigan should do!! Re-elect the governor!

[Go Gordon]

Many parts of the country have had their property "values" increase 50% in the last 5 years or so. That's also a 50% increase in property taxes.

I don't know how it is where you live, but most places do not reassess the value of homes for tax purposes every year. Here in NJ, reassessments are done once every 10 years. And when they do the assessments, just because the value may have doubled, the "rates" are adjusted downward so the increase is manageable. In other words, even though the assessed value of all property may double, revenues may only increase 10%. The year to year increase are even smaller than that, say a couple or a few hundred bucks per house, depending on the previously assessed value.

[EVO X]

And.....if the net cost of borrowing on your home is 4% after the tax deduction, why not put the money into something at 7.3% or more and make money.

If a retiree has hit critical mass, why take the risk?

[carolinalivin]

Retirees have some specific needs. If your critical mass is met projecting out the cost of living and medicaid costs more power to you.

I'm helping some seniors keep their homes and move into retirement homes. The resultant rent is more than their mortgage payment. And they have future appreciation for themselves or their heirs.

I'm am getting working folks out of 401(k)s into better retirement programs and to build enough wealth so that their definition of critical mass is at a higher level and standard of living.

[Go Gordon]

I'm am getting working folks out of 401(k)s into better retirement programs

Spoken like a true financial planner. Pay a planner instead of taking advantage of 401(k)s, which are the best investment for 99% of all people.

[carolinalivin]

I'll excuse your insinuation as coming from ignorance.

Retirement is a long term investment for most people. Real estate provides the best leverage and is the best long term investment. Then stabilize with investment grad insurance or life settlement investing.

You can get a tax break from your real estate investment also.

The basic premises of 401(k)s are false. Why would you base your retirment on being in a lower tax barcket when you retire. You will actually need more money when you retire. My clients want to retire early and live longer. A 401(k) won't do that for you.I paid into a 410(k) for 18 years, actually a 457 and I talked many others into doing the same. Now I am showing others haw to do better.

PS: my planning is free, unlike many planners who sell annuities, mutual funds or insurance. I sell none of those and my clients owe me nothing at the end.

[EVO X]

Good luck to you. Sounds like the people your trying to help haven't hit critical mass yet.

[carolinalivin]

Not too many working families have. But when they do it will be at a higher standard of living. I think you missed my point about ccritical mass. If your definition is an old 1 bedroom house and retire on bread and water, many people can reach it. With increasing life expectancies and some wanting to retire early, it takes more than a 30 year 401(k) to get there.

I'm in my third year and some of my earlier clients have build significant wealth and one is saving $45,000 a year on taxes. Others are just getting started, but the programs and concepts upon which I base my recommendations are time-tested.

Good luck!

[CSM]

Michigan, the bastion of socialists voters getting their socialists leadership and then complaining about socialism's results.